Section Title
Funds Keep Tech Firms Humming
SARTA index shows slow but steady growth.
By Mark Melnicoe - mmelnicoe@sacbee.com
Published 12:00 am PDT Friday, March 21, 2008
Story appeared in BUSINESS section, Page D3
A big increase in venture capital funding kept the Sacramento area's technology sector growing in the third quarter of last year, albeit at a slower pace, according to results released Thursday by the Sacramento Area Regional Technology Alliance.
The SARTA technology index rose 2.79 percent to 237.95 during the quarter and grew 34 percent over the year-earlier period. The index, a barometer of the health of the region's high-tech economy, was pegged at 100 upon its creation in October 2003. SARTA officials say the listing of 50 companies is unique in measuring the health of the tech sector in a specific region. The most recent reading showed a schism between the six publicly held companies and the private firms in the index. Public companies' market capitalization dropped 12.7 percent to $1.85 billion during the quarter, with all except one showing declines. Unify, which makes business software, defied the trend with a whopping 91 percent increase during the quarter.
The biggest decline came from Digital Music Group, which plunged 37.9 percent and later was acquired by the Orchard in New York. DMG, which distributed digital music to online stores such as Apple's iTunes, lost $1.3 million in the third quarter before the merger's completion in November.
The public companies' performance contrasted with the major stock indexes, which rose slightly during the third quarter. The Nasdaq Stock Market index was up 2.63 percent.
Companies still in the venture stage, making up the bulk of the SARTA tech index, gained little in terms of revenues, which rose 0.3 percent to $506.9 million, or remained virtually flat in terms of employment.
The big news for the private firms was a 113 percent increase in venture capital funding. They took in more than $22 million during the quarter, led by SynapSense.
"The third quarter was very strong for private equity in our area," said Oleg Kagonovich, former CEO of SARTA and now a principal at DFJ Frontier, a venture capital firm. "Despite a downturn in the economy and real estate lows that we're having, almost twice as many companies were hiring as laying off in the tech index (16 hiring, nine laying off). That's not reflected in the employee number. … That's a pretty strong reflection of the early stage tech economy here."
Peter Van Deventer, chief executive at SynapSense, expressed gratitude for the $11 million in venture funding his Folsom-based company received in the third quarter. "We were very fortunate that we were able to raise a B round of funding," he said. "We added two very strong venture funds to our portfolio. We had three that all stayed on – American River, DFJ Frontier and Nth Power" (San Francisco).
Van Deventer said new funding also came from Emerald Ventures, the leading clean-tech European VC firm, based in Zurich, Switzerland, and Sequoia Capital, a top international VC firm based in Menlo Park.
SynapSense makes wireless instruments that help control energy use and efficiencies in data centers.
SARTA index companies are chosen from the high-tech and life-science industries and must be headquartered in the counties of Sacramento, Placer, El Dorado, Yolo, Sutter, Butte, Nevada, Solano or Yuba.